Land of the Giants
Congratulations to our hometown favorites and 2025 champions, the Birds! With a mammoth parade scheduled for Friday, February 14th, fans will show their love for Jalen, Saquon, the oh so talented rookie defensive backs, and our monstrous offensive line, among others. Much has been written and said about the O-line, the biggest (and heaviest) in championship game history. This fabulous five have been leading the way all season for the best rushing back in Philadelphia’s history. And yes, the combination of a great running back and a big, powerful offensive line is a joy to behold.
I couldn’t help but think about this monstrous group leading the way without considering the stock market’s performance over the past year or so. The parallel is simple: seven stocks, bigger than everyone else, combined with a reasonably strong economy have powered the overall U.S stock market to very strong results. These giants even have a nickname: the Magnificent Seven. Apple, Microsoft, Nvidia, Alphabet (Google), Amazon, Tesla, and Meta (Facebook). In an article today it stated “due to their outsized market capitalizations, Magnificent Seven stocks hold a disproportionate influence on the market-cap weighted Nasdaq composite and S&P 500 indexes.”* These seven companies comprise roughly 32% of the S&P 500. My associate previously blogged about this phenomenon (see S&P 493, 01/11/2024).
In football, outsized and talented lineman paved the way for the Birds to have a great season. Will it mean the same for the stock market? I’m not sure, and history is not clear on the subject either. In fact, if you distill recent performance data you will notice a shift away from the Mag 7 towards many other companies. To wit: based on data I compiled yesterday, two of the Mag 7 recently pulled back over 20%. Three others pulled back just over 10%. Only Meta and Amazon are near their all-time highs. With five of seven down, you’d think we’d be suffering. Yet the Dow Jones Industrial Average is up over 5% year-to-date. The market has been rotating. Even though the Mag 7 still dominate headlines and the S&P 500 Index, the other members of the team are delivering the goods.
So, what do we do? Is it time to consider short passes to your unheralded but dependable tight end? Do you go long to your Heisman trophy winner? How about quick passes over the middle to your alpha-male, sideline-book-reading wide receiver and let him power through smaller defenders? And what about throwing to your fourth option, a little-known player also from Penn State who happens to be very, very talented?
Coach Sirianni had a plan. It worked. My advice to you: have a plan built around a diversified wealth of talent. It may combine some of the giants, or some of the lesser-known opportunities. Know that it takes discipline, training and patience to succeed. Win your investment championship game again and again and again.
Ralph McDevitt February 13, 2025
*Investor’s Business Daily, 2/13/25. Article by Scott Lehtonen.
There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing materials are accurate or complete. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary.
Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC.
